Bovis Homes, the house builder, reported on Friday that its average selling price increased by 7% in 2017, but completions in the year fell and the company also warned on operating margin.
Profit before tax was in line with management expectations, the company said, and balance sheet restructuring left it with a year-end net cash position of £145m.
The company's average selling rose by 7% to £272,000 and during the year it delivered 3,645 completions, down from 3,977 in 2016.
Investment in "process change" and customer services, however, had an adverse impact on the company's operating margin during the year, while exceptional items and one-off charges totalled £10.3m.
Greg Fitzgerald, chief executive(left), said: "There has been a step change in the quality of our homes delivered on completion and I'm pleased to see this reflected in our level of customer satisfaction which continues to improve.
"We've made excellent progress with our balance sheet restructuring resulting in a year end cash position significantly ahead of expectations.
"Our forward order position is strong,” he continued, “and with robust industry fundamentals, we expect the Group to deliver a significant improvement in profitability in 2018."
Indeed, the industry fundamentals remain robust - there's a shortage of housing in the UK, mortgage rates remain attractive in spite of the recent interest rate hike and there are plenty of government incentives to buy.
And while many surveys have indicated slowing house price growth, most of the builders that have reported in recent days have increased their average selling prices.
Slowing price growth
But many are cautious in the face of slowing price growth and rising costs.
Persimmon, on Wednesday, reported 9% revenue growth and said pre-tax profit would be ahead of expectations. However, the company was cautious over the likely impact of the UK leaving the European Union.
"The latest interest rate rise should not have had any real impact but there has been a noticeable trend in the slowdown of house price growth amid the uncertainty created by Brexit," said Graham Spooner at the Share Centre.
Shore Capital analyst Robin Hardy said in a note earlier in the week: "The housebuilders face stiffening headwinds in 2018. We believe and we have already seen from the Halifax and Nationwide house price indices that the current rate of house price inflation is essentially zero.
"With the sector needing 2%-2.25% to recover costs and hold margins, we believe that it will become more difficult to support a consensus in which it is widely assumed that margins can continue to expand."
Shares in the sector fell rather heavily on Wednesday after Persimmon reported. Taylor Wimpey and Barratt Developments have also reported similar conditions in recent days.
In opening trade on the London Stock Exchange shares in Bovis Homes climbed 0.87% to £11.59.
Persimmon rallied 0.42% to £26.54, Barratt climbed 0.64% to 619.7p and Taylor Wimpey added 0.51% to 197.5p.
Picture courtesy of Bovis Homes